Planning

Planning is the process of setting goals and choosing the means to achieve those goals. It can be informal or formal. Formal are; Strategic plans : Designed by top management and define the broad goals for the organization. Operational plans : detailed plan to carry out day to day actions of strategic plan.

Strategic v/s operational plan

Time horizons Scope Degree of details interdependence

Types of plan

Missions or purpose Objectives or Goals Strategies Policies Procedures Rules Programs Budgets

Mission statement

Google's mission is to organize the world's information and make it universally accessible and useful.

Purpose of Planning

Provides directions Reduces uncertainty Minimize waste and redundancy Sets the standards used in controlling.

Planning process

Analyze external environment & internal resources Set objective Develop action plan Monitor outcomes

Objective

Objective is an verifiable end towards which organizational and individual activities are directed. Hierarchy of objectives : objective for various level of authorities, Top to down and bottom to top process. Key areas : Market standing, Innovation, productivity, physical & financial resources, profitability, manager performance & development, workers performance & attitude, public responsibility, service , quality

Setting Objective

SMARRT
Specific Measurable Achievable Relevant Realistic Time based

MBO

A system in which specific performance objectives are jointly determined by subordinates and their supervisors, progress towards objective is periodically reviewed and rewards are allocated on the basis of that progress

Elements of MBO system

Commitment to program: to achieve personal and organizational objectives Top level goal setting Individual goals Participation Autonomy in implementation of plans Self control

Limitations

1. It over-emphasizes the setting of goals over the working of a plan as a driver of outcomes. Employees tend to focus on the goals by which they are going to be judges so they direct their efforts towards quantity rather than means or quality It encourages individual approach than team approach. Employees tend see goals as ceiling rather than floor thus limits their efforts.

Strategy
It is determination of the basic long term goals and objectives of an enterprise and the adoption of courses of action and the allocation of recourses necessary for carrying out these goals

Courses of action Process of seeking key ideas ( as compare to routine implementation) How strategies are formulated ( not what it turn out to be)

Policies are general statements or understandings that guide the managers thinking in decision making

Types of Strategy
Corporate level strategy Business level strategy It can be further classified as internal & external strategy Internal strategies Domain choice, Recruitment, buffering, smoothing, Rationing, Geographic dispersion External Advertising, contracting, co-opting, lobbying

Strategic dimensions

Innovation Marketing differentiation Breadth Cost control

Theories of strategy

Alfred Chandlers strategy structure thesis unless structure follows strategy, inefficiency results Miles & Snows four strategic types Defenders, Prospectors, Analyzers & reactors Porters competitive strategy Cost leadership, Differentiation & Focus Millers Integrative frame work

Strategic management process

Identifying current mission goals & strategies Doing external analysis & internal analysis Formulate strategies Implement strategies Evaluate results & corrective actions

TOWS Matrix
Internal External External opportunities (O) Internal strength (S) SO strategies Maxi Maxi Internal weakness (W) WO strategies Mini Maxi WT strategies Mini Mini

External threats ST strategies (T) Maxi Mini

Portfolio matrix - BCG

HIGH
Business Growth rate LOW

Star

Question mark

Cash cows

Dogs

Strong Market share

Weak

Porter corporate strategy model

Threat of new entrants

Bargaining power Of suppliers

Rivalry Among competitors

Bargaining power of Customers

Threat of substitutes

The purpose of Five-Forces Analysis

The five forces are environmental forces that impact on a companys ability to compete in a given market. The purpose of five-forces analysis is to diagnose the principal competitive pressures in a market and assess how strong and important each one is.

Porters Five Forces Model of Competition

Threat of Threat of New New Entrants Entrants

Threat of New Entrants

Economies of Scale

Barriers to Entry

Product Differentiation Capital Requirements

Switching Costs
Access to Distribution Channels Cost Disadvantages Independent of Scale Government Policy

Expected Retaliation

Porters Five Forces Model of Competition

Threat of Threat of New New Entrants Entrants

Bargaining Power of Suppliers

Bargaining Power of Suppliers

Suppliers are likely to be powerful if:
Suppliers exert power in the industry by: * Threatening to raise prices or to reduce quality

Supplier industry is dominated by a few firms Suppliers products have few substitutes Buyer is not an important customer to supplier Suppliers product is an important input to buyers product

Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases

Suppliers products are differentiated

Suppliers products have high switching costs Supplier poses credible threat of forward integration

Porters Five Forces Model of Competition

Threat of Threat of New New Entrants Entrants

Bargaining Power of Suppliers

Bargaining Power of Buyers

Bargaining Power of Buyers

Buyer groups are likely to be powerful if: Buyers are concentrated or purchases are large relative to sellers sales Purchase accounts for a significant fraction of suppliers sales Products are undifferentiated Buyers face few switching costs Buyers industry earns low profits Buyer presents a credible threat of backward integration Product unimportant to quality

Buyers compete with the supplying industry by:

* Bargaining down prices * Forcing higher quality * Playing firms off of each other

Buyer has full information

Porters Five Forces Model of Competition

Threat of Threat of New New Entrants Entrants

Bargaining Power of Suppliers

Bargaining Power of Buyers

Threat of Substitute Products

Threat of Substitute Products

Keys to evaluate substitute products: Products with similar function limit the prices firms can charge Products with improving price/performance tradeoffs relative to present industry products Example: Electronic security systems in place of security guards Fax machines in place of overnight mail delivery

Porters Five Forces Model of Competition

Threat of Threat of New New Entrants Entrants

Bargaining Power of Suppliers

Rivalry Among Competing Firms in Industry

Bargaining Power of Buyers

Threat of Substitute Products

Rivalry Among Existing Competitors

Intense rivalry often plays out in the following ways:
Jockeying for strategic position Using price competition

Staging advertising battles Increasing consumer warranties or service Making new product introductions

Occurs when a firm is pressured or sees an opportunity

Price competition often leaves the entire industry worse off Advertising battles may increase total industry demand, but may be costly to smaller competitors

Rivalry Among Existing Competitors

Cutthroat competition is more likely to occur when: Numerous or equally balanced competitors Slow growth industry

High fixed costs High storage costs

Lack of differentiation or switching costs Capacity added in large increments Diverse competitors High strategic stakes

High exit barriers

Porter strategies

Overall cost leadership Differentiation strategy Focus strategy

Premising & Forecasting

Planning premises are the anticipated environment in which plans are expected to operate. These are economic, Social, political/legal, Technological. Delphi technique - used for technological forecast

Decision Making

It is the process of identifying and selecting a course of action to solve a specific problem. Time and human relationship are crucial elements in process.

Problem threshold

Setting priority

Is problem easy to deal with? Might the problem resolve it self? Is this my decision to make?

Over view of Managerial decision making process

Decision making approach Rationality Bounded rationality intuition

Decision making error & biases

Types of problem & decision Well structured programmed Unstructured non programmed

Decision making process Decision making condition Certainty Risk uncertainty

Decision Choosing best alternative, maximizing, satisfying Implementing evaluating

Decision maker style Linear thinking style Non linear

Rational Decision making process

1. 2.

3. 4.

5.

Investigate the situation Identification of decision criteria allocation of weight Developing alternatives Evaluate alternatives and select the most appropriate Implement and monitor.

Rational Decision making example of CCD

Situation The sales report as of Dec 31, 2009, on desk of GM Sales indicated decrease in over sales wrt target planned

ccd

Stage I :Investigate situation

Define problem the reduction is due which product line in which area in which month Diagnose causes Is it due to (1) own coffee shop (2)loose coffe beans thru retail outlets (3)accessories Decision objective It is about reduction in sales volume of coffee beans thru retail out lets in south zone

Ccd

Stage II: Develop Alternatives

Increase outlets Cover more area Increase ad/ promotion budget Offer special discount/ volume discount to dealers. Product modifications add different flavors, different applications Reduce price

CCD

Sage III : Evaluation

Is it feasible? Is it satisfactory? What are possible consequences?

Stage IV : Implement & Monitor